United Airlines and its US rival Continental Airlineshave just announced a $3.2 billion merger to create the world’s biggest carrier. The combined group will adopt the United Airlines name with Continental CEO Jeff Smisek heading the company.

Glenn Tilton, chairman, president and CEO of United, will serve as non-executive chairman of the combined company’s board until the end of December 2012.

“While there is potential for this transaction to create a truly great airline, there are also risks involved,” the unions said in a joint statement.

“We have sacrificed too much through years of concessions, furloughs, pension freezes and terminations to accept unwarranted risk, and any risk requires reward.”

Analysts predict that this merger could eventually result in higher fares as the combined airline group cuts capacity.

Tilton said: “Building on our Star Alliance partnership, we are creating a stronger, more efficient airline, both operationally and financially, better positioned to succeed in a dynamic and highly competitive global aviation industry.

“This combination will provide a strong platform for sustainable, long-term value for shareholders, opportunities for employees, and more and better scheduled service and destinations for customers.

“Knowing and respecting our colleagues at Continental as we do, we are confident that together we can compete successfully in what is now, clearly, a global marketplace.”